New York, NY, United States (4E) – Investing in healthcare and biotech companies has become attractive once again after the sector bottomed out in the spring.
The prospect became clear with gainers in the stock indices so far this week included from pharmaceutical giants to small biotech firms. Vertex Pharmaceuticals Inc. (VRTX) shares increased 1.5 percent, Abbott Laboratories (ABT) was up by 0.20 percent and Roche Holding AG (RHBBY) rose 0.5 percent.
The uptick follows sizable investments funneled to health-care mutual funds and exchange-traded funds (ETFs) for the year ending April 30. More than $6.91 billion worth of investments have gone into mutual funds while $6.97 billion have gone into U.S. health-care ETFs, based on independent research firm Morningstar’s data.
The uptick bodes well for cancer therapeutics bigwigs like Bayer Healthcare Pharmaceuticals (BAYN), Johnson & Johnson (JNJ), and Sanofi (SNY) or niche players BioCorRx, Inc. (OTC: BICX) and Cytomedix, Inc. (CMXI),
Index-wise, the healthcare sector is on a downward trend since the spring sell-off, when investors turned to defensive stocks (i.e. oil, power), while others focused on consolidation and managing increasing hedging costs. But the sector rallied until the end of first week of June, with many of the indices advancing, particularly those trading healthcare and biotech stocks.
Midway through last week, U.S. markets finished a bit higher, according to a technical snapshot from Globe Newswire. The NASDAQ Composite Index, where most healthcare and biotech stocks are offered, edged up by 0.41 percent to 4,251.64. The same goes for the S&P 500 which saw a 0.19 percent increase to 1,927.88.
Meanwhile, the S&P 500 Health Care Sector Index closed at 694.30, a 0.23 increase from its previous close, and a 3.81 percent rise for the whole month. The Dow Jones Industrial Average also soared the same day to 16,737.53, up by 0.09 percent.
For the past 12 months up to end of May, healthcare stocks trading in the S&P 500 also soared by 24 percent, outperforming the large-cap index’s 18 percent revenue during the same period, The Wall Street Journal reported. Large caps share a large chunk—13 percent, in fact—of the overall market capitalization of the S&P 500.
This week, healthcare stocks on Wall Street slightly dipped by 0.5 percent, according to an independent report on Investors Place. Dow Jones and S&P 500 were still up 0.1 percent, while Nasdaq stayed put.
The healthcare sector appears primed for a new period of growth as more investment opportunities are seen being triggered by the Affordable Care Act and considering that the sector is outperforming the rest of the overall market.
Obamacare is expected to boost share prices to record levels and fan mergers-and-acquisitions in the industry. The increased healthcare demand from aging baby boomers as well as improved financial conditions and spending in emerging economies are also seen to fuel a rise in healthcare stocks. HMOs, in particular, are destined to grow bigger this year, according to Forbes.com.
HMO stocks that were reported to see skyrocketing returns in the immediate future include Aetna (AET), United HealthGroup (UGH) and Magellan Health Services (MGLN), to name a few.